Joyce Bigbee, Alabama's Legislative Fiscal Office director, warned lawmakers the states 2012 fiscal year outlook is grim for the Education Trust Fund and the General Fund. (The Birmingham News file/Joe Songer)

MONTGOMERY -- Public schools and colleges in the 2012 fiscal year, which starts Oct. 1, could see a drop of as much as $687.6 million in combined spending from the state Education Trust Fund and federal stimulus money compared to this year, Legislative Fiscal Office director Joyce Bigbee told lawmakers at a budget hearing today.

That would be a drop of 11.1 percent, from $6.17 billion in combined trust fund and stimulus spending this fiscal year to a maximum of $5.48 billion that Bigbee said would be available to spend from the trust fund in fiscal 2012, when she said there may be no federal stimulus money left to spend. The state has been using the federal aid to supplement trust fund spending.

Bigbee's estimates assume that Gov. Robert Bentley this year will not impose proration, or cuts in budgeted trust fund spending caused by lower-than-expected revenues.

Her estimates also assume that Alabama's city and county school systems this year will spend all of $149.5 million in federal stimulus money approved by Congress last year. Congress gave schools the option of spending the money this year or next year.

Bigbee's estimates at today's hearing were even gloomier for the General Fund, a major source of state money that supports Medicaid, prisons, courts and other non-education functions of government.

She said combined spending from the General Fund and federal stimulus money this year would total $1.88 billion but drop to a maximum of $1.32 billion next year, when she expects there to be no federal stimulus money left to spend.

That would be a drop of $554.2 million, 29.5 percent. The state has been using federal aid to supplement General Fund spending.

Bigbee's forecast did not include a $55 million performance bonus, announced in December, that the federal government awarded Alabama's Medicaid agency. State Finance Director David Perry said Bentley's administration intends to spend the money this year.

If that happens, Bigbee's adjusted forecast would be that General Fund and stimulus spending this year would total $1.93 billion and that it would fall to a maximum of $1.32 billion next year, a drop of $609.2 million, 31.5 percent.

Cutting General Fund spending this year would reduce the size of any cut next year.

Bigbee's forecast also did not count on an estimated $263 million windfall the General Fund could get in fiscal 2012 from the Alabama Trust Fund, the state's giant savings account that collects some of the royalties paid the state by companies that pump natural gas from offshore.

The attorney general's office in recent opinions said the Alabama Trust Fund board miscalculated distributions the board made from the trust fund to the General Fund in 2003 through 2007. State Treasurer Young Boozer's office estimated the windfall could total $263 million for the General Fund.

Perry said Bentley's administration, if given the choice of spending the windfall this year, to avoid proration, or next year, to avoid falling off a financial cliff, the administration would choose to spend the money in fiscal 2012.

If the $263 million estimate is accurate and if it were spent next year and added to Bigbee's forecast as adjusted for the performance bonus, combined spending from the General Fund and stimulus money would drop from $1.93 billion this year to a maximum of $1.59 billion next year, a drop of $346 million, 17.9 percent.

If in addition Bentley does cut this year's appropriated General Fund spending by $150 million, then the drop in combined spending next year would total more like $196 million, 11 percent.

Perry said of the cuts in combined General Fund and stimulus spending this year and next year likely will lead to layoffs among agencies that rely on General Fund money. Not all do. The conservation and transportation departments, for instance, historically have gotten little or no General Fund money. They tap other state funds instead.

Perry declined to guess how extensive layoffs could be next year.

Perry said layoffs, at public schools, for instance, might be avoidable next year even with likely reductions in combined Education Trust Fund and stimulus spending, especially if the economy and state tax collections recover.

Bigbee's state spending estimates for next year assume the Legislature will not raise taxes. They also assume Congress won't approve another stimulus package to boost spending by states nationwide. Congress passed stimulus packages in February 2009 and last year.